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Hong Kong
By Mary Kavanagh
The downward trend in retail sales continued in July when local retail sales fell 7.7 percent in value and 8.5 percent in volume, marking 17 months of consecutive decline. Sales in the jewelry, watches and clocks and valuable gifts category fell 26.2 percent in value and 29.2 percent in volume. Thomson Cheng, chairman of the Hong Kong Retail Management Association (HKRMA), said he expected the figures for August to be worse than July due to the typhoon and rainy weather season. Most HKRMA members reported they expected the sales decline in August to be close to double-digit figures. Chow Sang Sang, one of the city’s largest jewelry retail chains, reported a decline in profit of 50 percent year-on-year for the first half of 2016 and plans to reduce the number of retail outlets.
Lawrence Ma, founding president and chairman of the Diamond Federation of Hong Kong (DFHK), acknowledged the ongoing challenges in the diamond industry at a press conference at the September Hong Kong Jewellery & Gem Fair 2016, but was nonetheless bullish about the prospects for the future. “I am more positive on the outcome of the next six to12 months,” he said. “I think the diamond market has stabilized since the beginning of this year. The price of polished diamonds remains quite steady and inventory is low. The second half of the year is the most important buying season, so we are optimistic it will be better than the first half and hope that customer sentiment will be better in 2017.”
Kent Wong, chairman of the Hong Kong Jewellers’ & Goldsmiths’ Association and managing director of Chow Tai Fook, also acknowledged the challenging economic climate for its members, but was hopeful that the market would pick up in the second half. “Hong Kong has seen a big adjustment in customer buying behavior because Mainland Chinese consumers accounted for more than 50 to 60 percent of jewelry sales in Hong Kong over the past ten years,” he said, noting the impact of the decline in visitor numbers to the city over the past several months. “Local Hong Kong consumption is flat or showing low single-digit growth. The areas worst hit are the tourist areas where the Chinese visitors used to buy,” Wong added, noting that consumer buying behavior on the Mainland has also changed, although domestic consumption is still increasing. “In the future, we predict that the market will be driven by service rather than product. In the past, we talked about how to make excellent design and world-class products, but looking forward, we need to focus more on service,” he said. Ma reiterated the important role that service will play in the future of the industry. “It used to be a product world, focused on who had the best product with the best features and pricing, but now it’s innovation and service.”
The optimistic outlook for the next six months was less evident at the jewelry fair itself. Exhibitors from Hong Kong were measured in their reactions to the fair, with many saying it was “okay” or similar to last year. “It’s not as bad as expected,” said Wilkin Lam, Po Shu Jewellery Co. Ltd., manufacturer of diamond and pearl jewelry, noting there was more traffic than at the September 2015 show, but consumers were not buying. Kenneth Chan, director of Edelweiss Jewellery Company, a Hong Kong manufacturer and wholesaler of diamond goods, said market sentiment is still weak — in particular, the U.S., which is his main export market for manufactured items. He attributed this in part to the ongoing presidential election, which is causing some uncertainty. “Customers come and say hello, but they are not buying,” he said, adding that many of them still have a lot of inventory. Edelweiss also has two small retail outlets in downtown Hong Kong, which are doing okay thanks to relatively low rents and regular customers.
Some companies are focusing on less expensive jewelry pieces to try and move goods. “All big brands are changing to carry cheaper items,” Chan said. Payal Shah, founder and CEO of L’Dezen, a jewelry designer and manufacturer, has also started creating less expensive lines of jewelry that appeal to younger consumers at a more affordable price point. Shah, whose creations typically comprise sliced diamonds, said most of her sales at the fair were to private individuals who came to buy for themselves. “Most of my sales have been to Hong Kong local women who think they can buy jewelry at a better price at the show,” she said.Article from the Rapaport Magazine - October 2016. To subscribe click here.
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